London’s stocks have worst day since start of Covid as banking crisis fears grow

ITV News Correspondent Vincent McAviney reports on a difficult day in the City

Fears that the economy might be on the edge of another “2008-style crisis” caused shares in top European banks to plunge and caused London’s FTSE 100 index to have its worst one-day performance since the start of the Covid-19 pandemic.

Jitters spread through global markets as troubled bank Credit Suisse saw its share price close down by nearly a quarter, hitting a new record low. The Swiss bank drove the panicked mood after one of its top investors, Saudi National Bank, said it could not increase its stake in the struggling lender.

Over the weekend, investors had been shaken by the collapse of Silicon Valley Bank (SVB) in the US, sparking concerns about the viability of the “too big to fail” Credit Suisse.

The Zurich-listed bank saw its share price tank by more than 25% before trading was temporarily halted.

It led to sharp falls in the share price of other big banks, with London-listed Barclays plunging by more than 8%, and European banks like Societe Generale and BNP Paribas showing losses of around 10%.

“If the bank fails, this could have major implications for other European banks that have exposure to the beleaguered Swiss lender,” said Fawad Razaqzada, a market analyst for City Index and Forex. “Concerns over another 2008-style financial crisis have intensified,” he warned.

The collapse of Silicon Valley Bank (SVB) in the US prompted fears about the health of the banking sector, and the impact of a relentless cycle of interest rate rises.

Despite President Joe Biden seeking to reassure Americans that the US’s financial system is sound, the failure spooked global investors during a time of nervousness around the robustness of smaller, regional banks.

Credit Suisse added fuel to the fire after revealing on Tuesday that it had found “material weaknesses” in its financial reporting, meaning it failed to identify certain risks.

It follows a difficult time for the international bank, which recorded a heavy group net loss of 7.3 billion Swiss francs (£6.5 billion) over last year.

Neil Wilson, chief market analyst at Finalto, warned that Credit Suisse is “too big to fail” and noted concerns from investors that the bank could be “the next shoe to drop” following SVB’s failure.

Andrew Kenningham, an economist at Capital Economics, admitted that “at this stage, a huge amount is unclear” regarding the viability of the lender.

The turmoil prompted an automatic pause in trading of Credit Suisse shares on the Swiss market. Credit: AP

He said: “The problems in Credit Suisse once more raise the question whether this is the beginning of a global crisis or just another ‘idiosyncratic’ case. “Credit Suisse was widely seen as the weakest link among Europe’s large banks, but it is not the only bank which has struggled with weak profitability in recent years.” He added that its problems were “well known so do not come as a complete shock to either investors or policymakers”.

Furthermore, the European Central Bank (ECB) is expected to increase interest rates again on Thursday, adding to nervousness about the banking sector.

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